Which loan calculator should I use?
Start with the question you are trying to answer.
- What will it cost each month? Use the mortgage calculator for a home, the auto loan calculator for a car, or the general loan calculator for anything else with a fixed rate.
- How much can I borrow? The home affordability calculator works back from your income, and the debt-to-income calculator shows the ratio lenders look at.
- How do I pay it off sooner? Try the loan payoff, credit card payoff or amortization calculator with an extra monthly payment.
- Is a new deal better? Compare offers with the APR calculator, and test a new rate with the refinance calculator.
Three numbers that decide what a loan costs
Every fixed-rate loan comes down to the amount you borrow, the interest rate and the time you take to repay. A longer term lowers the monthly payment but raises the total interest, because the balance stays high for longer. A lower rate cuts both. Fees add to the cost without showing up in the rate, which is why comparing by APR is more honest than comparing by rate alone.
Frequently asked questions
How is a monthly loan payment calculated?
A fixed-rate payment is set so the loan reaches zero on the last payment. It depends on the amount borrowed, the monthly interest rate and the number of payments. Each payment first covers that month's interest, and the rest reduces the balance.
What is the difference between interest rate and APR?
The interest rate is the cost of borrowing the money. APR also includes upfront fees, spread over the life of the loan, so it shows the full yearly cost. Two loans with the same rate can have different APRs.
Do extra payments really save much?
Usually yes. Extra payments go straight to the balance, so less interest builds up every month after that. The earlier in the loan you make them, the more they save. Check that your lender does not charge a prepayment fee.